Is It Better To Rent Or Buy a Vacation Home?
If you’re asking is it better to rent or buy when it comes to a vacation property, your first step should always start with a consideration of your long term financial and lifestyle goals. There are benefits to both renting and buying a vacation home, and there are drawbacks, too. Having a strong handle on what they are is important before you make your decision.
As Avalon realtors, we work with a lot of clients who are trying to decide whether they should rent or buy, so we thought it would be helpful to outline some of the advice that we give. Read on for some useful guidance that can hopefully assist you in making your decision.
Buying vs. Renting a Vacation Rental Home
A vacation rental home can be a great source of passive income, but what it normally isn’t is a purchase with a high ROI. That’s because there are a lot of costs associated with homeownership, and when you’re doubling those costs with the purchase of a second home—even one that you’re renting out—it can be difficult to break even year to year. As such, many people opt to rent their vacation homes instead, enjoying the property during set periods of time without having to incur the liability of things like property taxes, insurance, and maintenance expenses.
So why might someone choose to buy? Well, that depends on how you answer the question of what to look for in a vacation rental. If you want a place that you can visit and enjoy as much or as little as you please, with a little bit of extra income coming in on the side, then buying just might be the way to go.
3 Major Factors to Consider
Real estate investments, like all investments, come down to a cost-benefit analysis. It’s up to each individual to decide whether the benefits of buying a vacation property outweigh the likely financial loss that will occur. Here are some factors to consider when making that decision for yourself.
- What are your long-term financial goals and needs? If you’re looking to make an investment that will pay off in the long term, than you may be better off renting a vacation home when it’s needed and investing somewhere with a greater guarantee of a return. While the passive income from a vacation rental can run quite high, it’s rarely enough to offset the costs of owning a second home.
- Is the property somewhere that you visit often? If the property is located somewhere that you spend a lot of time in, for example, a spot that you’re visiting multiple times per year, then owning a little slice of it for yourself is often nice. Having a place that’s all your own in an area that you love to spend time is a luxury, but if it’s in line with your financial and lifestyle goals then it’s a luxury worth having.
- How involved do you want to be? There are a lot of moving pieces to owning a rental property. While we offer our clients management services that take the big stuff off their hands, they do still have to consider basics like balancing costs and overseeing any major maintenance. Still, many people find it to be worth it for the income that a rental property can generate.
RJ Soens Group is Here to Help—Whatever Your Decision
Our team of Seven Mile Island real estate experts can help you with all the steps involved in making your decision, including breaking down the costs of renting vs. owning and what to look for when buying a vacation home. And if you do decide to buy, we’ll help you manage your property so that your investment is less about work and more about enjoyment. Contact us today to learn more!